US economy contracted last quarter - uh-oh

As usual, pundits are going to spin this both ways depending on their interests, but this is not good news.

a reccession has in modern times been defined as two consecutive quarters of negative growth. This is one. If next quarter is down, or if the previous quarter gets revised down to negative, we have a recession.

Taking out the spin, we can definitely say the odds of rising unemployment just got a whole lot better.

Bloomberg says that it's mostly the result of reduced government spending, but that consumer spending actually picked up considerably.

A decline in government outlays and smaller gain in stockpiles subtracted a combined 2.6 percentage points from growth.

Edit: Oh yeah, and Sandy.

Met the ghost of Stephen Foster at the Hotel Paradise
This is what I told him as I gazed into his eyes
Ships are made for sinking, whisky made for drinking
If we were made of cellophane we'd all get stinking drunk much faster...

Like i said, theres going to be spin. Dont pay attention to the reasons "why" or the expectations. After all, most of these pundits didnt even see this coming.

I remember pundits saying that the economy would enjoy a soft landing in 1991, 2000, and 2008.

Im more interested in discussing the hypothetical that we are in a recession right now, rather then debating spin.

I'm not sure what you mean by your last sentence. Isn't the hypothetical that we're in a recession again itself a sort of spin?

Met the ghost of Stephen Foster at the Hotel Paradise
This is what I told him as I gazed into his eyes
Ships are made for sinking, whisky made for drinking
If we were made of cellophane we'd all get stinking drunk much faster...

Two things: First, this is just the initial number. It will be revised over the next few months as more data becomes available. The average revision ends up being 1.3%, so there's a lot of flex there, both up and down. The previous month (and quarter) adjustments are often much bigger than the current month/quarter changes.

Second, the biggest drop was in defense spending, which (supposedly) declined 22%. That's not reality, that's a budgeting quirk. Even the full sequester is less than half that.

I'm not sure what you mean by your last sentence. Isn't the hypothetical that we're in a recession again itself a sort of spin?

Huh? Im not saying we are in a recession. But its a worthwhile and tinely discussion to explore what happens IF we are in a recession right now, compared to boring back-and-forth spinning the reasons why this has happened.

---------- Post added 2013-01-30 at 07:58 AM ----------

Originally Posted by braeldiil

Two things: First, this is just the initial number. It will be revised over the next few months as more data becomes available. The average revision ends up being 1.3%, so there's a lot of flex there, both up and down. The previous month (and quarter) adjustments are often much bigger than the current month/quarter changes.

Second, the biggest drop was in defense spending, which (supposedly) declined 22%. That's not reality, that's a budgeting quirk. Even the full sequester is less than half that.

Like ive said three times now, im not interested in debating the reasons why. Its really not an intelligent discussion because it turns into the same boring arguments. Im interested in exploring what happens if were in a recession.

As other people have said Sandy and National Defence cuts were the biggest issues and one time things. Consumer spending was up 2.2 percent which is a positive sign that things will pick up next quarter.

Huh? Im not saying we are in a recession. But its a worthwhile and tinely discussion to explore what happens IF we are in a recession right now, compared to boring back-and-forth spinning the reasons why this has happened.

OK, I misunderstood what you were trying to discuss here.

If hypothetically we end up back in a recession after next quarter's news, I foresee conservative job growth in the future, as businesses don't like to expand when the market isn't looking good for business growth. I could see a possibility of a new stimulus bill, though unless the recession is bad, I don't think it's likely. I could definitely see it having an impact on the midterm elections a couple years from now if we didn't come out of the hypothetical recession strongly by then.

Met the ghost of Stephen Foster at the Hotel Paradise
This is what I told him as I gazed into his eyes
Ships are made for sinking, whisky made for drinking
If we were made of cellophane we'd all get stinking drunk much faster...

Huh? Im not saying we are in a recession. But its a worthwhile and tinely discussion to explore what happens IF we are in a recession right now, compared to boring back-and-forth spinning the reasons why this has happened.

Are you under the impression that the temporary contraction in the economy caused by Sandy is "spin?"

1. What do you think the fed does, if anything, should a recession manifest?
2. How bad do you think unemployment gets if it happens?
3. how would this recession be different from previous ones?
4. are changes made to unemployment benefits?
5. how does a us recession now impact the global economy?

---------- Post added 2013-01-30 at 08:06 AM ----------

Originally Posted by Rukentuts

I look forward to the Republicans saying it's Obama's fault, whereas they advocate for austerity...and this contraction is attributed to austerity.

THATS what im trying to avoid. When we focus on why this happened, democrats and republicans start pointing fingers at each other and an economy thread implodes into a partisan political thread.

Lets have an intelligent discussion instead.

---------- Post added 2013-01-30 at 08:08 AM ----------

Originally Posted by Deadvolcanoes

Are you under the impression that the temporary contraction in the economy caused by Sandy is "spin?"

Im trying to deter people from asking why so it doesnt become political bickering. Its a useless question anyway.

Huh? Im not saying we are in a recession. But its a worthwhile and tinely discussion to explore what happens IF we are in a recession right now, compared to boring back-and-forth spinning the reasons why this has happened.

---------- Post added 2013-01-30 at 07:58 AM ----------

Like ive said three times now, im not interested in debating the reasons why. Its really not an intelligent discussion because it turns into the same boring arguments. Im interested in exploring what happens if were in a recession.

its not really an intelligent discussion to debate what happens if we're in a recession if we don't consider any causes of said recession either. It's like discussing the implications of a large air traffic disaster while ignoring the causes of it. Entirely worthless.

Also, severity is everything. If we have two straight quarters of an extremely small negative growth nothing will change. If it was one quarter of -20% growth that would be far more important to address.

its not really an intelligent discussion to debate what happens if we're in a recession if we don't consider any causes of said recession either. It's like discussing the implications of a large air traffic disaster while ignoring the causes of it. Entirely worthless.

Also, severity is everything. If we have two straight quarters of an extremely small negative growth nothing will change. If it was one quarter of -20% growth that would be far more important to address.

Its definitely NOT worthless. A rational mind looks at this contraction and wants to lay out new investing plans for the future. who cares why it happened. You say if we get two down quarters, im going to invest like so. If the next quarter is down a lot worse, i do this. If its down only slightly, i do that.

You dont just look at a couple opinions why it happened, marry that reasoning, and ignore the other possibilities.